Following Single’s Day (11/11), it can be easy to distinguish China’s e-commerce system from others purely by its market size. Alibaba’s sales figures for Single’s Day in 2018 outperformed the combined sales for e-commerce platforms in Australia for the entire duration of 2017. Consumers in China spent approximately A$42.4B[i] on Alibaba platforms on Single’s Day this year, in contrast to the A$21.3B spent online by Australian consumers in 2017.[ii]
Beyond size, there are a range of other key distinguishing factors which differentiate China’s e-commerce platforms from the likes of Australian e-commerce platforms. These factors include the prevalence of mobile shopping in China and the emergence of new retail.
Mobile shopping is the number one mechanism for e-commerce purchases in China and is expected to rise as more affordable handsets enter the China market.[iii] China’s mobile-first approach per PWC’s Total Retail 2017 survey, shows that 52% of customers in China utilise mobile shopping on a weekly or daily basis.[iv] This is a stark contrast to mobile shopping in Australia, where evidence suggests that only 1 in 5 e-commerce users in Australia utilise mobile shopping.[v]
Mobile shopping in China is a popular method of purchasing online and possesses an online shopping penetration percentage of 84%.[vi] This is a result of well-integrated platforms and applications which have incorporated numerous systems including payment such as Alipay or WeChat Pay, as-well-as several significant online e-commerce platforms only possessing mobile applications.
This is one of many changing consumer trends in e-commerce which have cultivated in a requirement for offline retailers in China to innovate and embrace the opportunity which exists through digital channels.
Any dialogue around China’s e-commerce platforms needs to consider new retail. New retail involves combining online platforms with brick and mortar offline platforms. This results in products possessing the valuable presence of being online and in brick and mortar stores, as-well-as providing customers with seamless integration. Customers can receive personalised experiences offline and online, making shopping once again a true experience.
This online to offline (O2O) approach is a mainstay in the China e-commerce sector and is a popular mechanism for Chinese retail companies to gain invaluable insights on customers, distribution and logistics. Chinese firms such as Alibaba are well known for integrating traditional brick and mortar stores with digital online technology, changing how retailers engage, interact and manage their customers.
Whilst new retail is emerging as a global retail trend, its presence in China is significant. It is anticipated that China’s new retail market will be valued at $264B USD by 2022 and will be a major driver in consumption growth.[vii] Alibaba’s Jack Ma is a leading voice on the benefits of new retail stating that “when we talk about new retail, we strongly believe that online commercial world and offline brick mortars are not separate worlds”.
Whilst new retail continues to emerge in China as a significant consumption driver, it is continuing to expand in Australia. This is signified by Alibaba bringing its ideal new retail concept to a range of pop up stores in Australia, in April 2018.[viii] Whilst new retail is not as prevalent in Australia as it is in China, it is poised to grow significantly in the future.
A concrete understanding of China’s e-commerce platforms beyond their incredible market size, allows businesses in Australia to appreciate customer behaviour in China and effectively execute on the available opportunities.
Author - Georgie Blom, MAI Capital Research Analyst
At MAI Capital, our focus is on providing the resources for promising Australian companies to scale into China. We are always happy to connect with aligned teams who are trying to tackle this challenge. If you are interested in connecting with us, please contact us on firstname.lastname@example.org